Oversight board asks court to maintain debt deal suspension for PREPA
By The Star Staff
The Financial Oversight and Management Board wants the U.S. District Court to maintain the suspension of the debt deal for the Puerto Rico Electric Power Authority (PREPA) and allow it to provide an updated status report in December.
The oversight board cited the ongoing and potential future further effects of COVID-19, hurricanes, drought, earthquakes, membership turnover on the oversight board, political change within the commonwealth, and unforeseen future events, all of which “may cumulatively extend the timetable for reaching a confirmable plan of adjustment for PREPA.”
“The government parties expect to make material progress on these analyses by the end of the calendar year, and the timing of the availability of a [COVID-19] vaccine might then be known and might further inform the analysis,” the oversight board said in a status report submitted Friday.
While PREPA’s restructuring support agreement (RSA) has been suspended more than 11 times, the oversight board insisted it has not been terminated and that the 9019 motion to approve it remains pending.
“The government parties seek to preserve the largely consensual posture of the case by evaluating the RSA in light of the changing economic landscape to determine whether the RSA needs to be renegotiated and, if so, how,” the oversight board said in the status report. “In either scenario, the court retains jurisdiction over the 9019 motion and the discretion to manage its docket to grant further adjournments.”
The Unsecured Creditors Committee (UCC) on Aug. 18 filed a motion to terminate the 9019 motion. The UCC motion was opposed by the island government on Sept. 1. In connection with its motion, the UCC filed a motion to compel discovery regarding “whether the RSA remains viable in its current form, and/or whether the RSA may be renegotiated by the parties.” That motion was also opposed by the government.
Magistrate Judge Judith Dein denied the discovery request for lack of relevance, holding that “the RSA’s status is not a matter of opinion or a subject of inquiry, it is an objective fact and, by its terms, the RSA remains in effect unless and until a termination right is exercised.”
After the UCC filed an objection to Judge Dein’s discovery order, the court adjourned the hearing on the termination motion until after the Sept. 25 status report.
The oversight board says since the submission of the July 31 status report, the COVID-19 pandemic has continued to affect lives and livelihoods on the island, as it has across the globe. Currently, the date a vaccine will be available and administered to Puerto Rico residents remains unknown, the same as it is unknown for the balance of the United States and its territories. Therefore, the duration of a constrained economy is unknown.
In addition to the COVID-19 pandemic, severe drought conditions forced the Gov. Wanda Vázquez Garced to declare a state of emergency on June 29. While drought conditions in Puerto Rico have subsided since peaking in July, PREPA spent substantial time preparing for, and now is in the midst of the Atlantic hurricane season, which has been one of the most active seasons in history.
In spite of the challenging conditions on the island, the commonwealth recently completed its primary elections and, following the upcoming November election, it will have a new governor, the oversight board said.
While conditions on the island remain fluid due to both extreme weather conditions and the unprecedented nature of COVID-19, the government has not remained idle during the postponement of the proceedings on the 9019 motion.
“Since the last status report, the Oversight Board continues to conduct diligence into the RSA and the affordability and sustainability of electricity rates on the island given the still changing economic landscape and the effects of the COVID-19 pandemic, as well as to analyze the optimal means of implementing the RSA transactions,” the oversight board said.
In addition, the Federal Emergency Management Administration announced last week that it plans to award almost $13 billion to Puerto Rico, with some $9.6 billion dedicated to help rebuild Puerto Rico’s electrical grid to support the Hurricane Maria response and recovery. Federal funding will allow PREPA to repair and replace thousands of miles of transmission and distribution lines, electrical substations, power generation systems, and office buildings, and make other grid improvements. The government parties are in the process of reviewing the grant, the required cost share related thereto, and the impact on PREPA, the oversight board noted in the status report.